Superannuation changes to Division 296 tax
16/10/2025
Treasurer Jim Chalmers has significantly watered down the government’s proposed $3m superannuation tax amid criticism from tax experts and investors.
The government has confirmed several important changes to the Division 296 proposed superannuation tax reforms. The updated measures aim to improve fairness while reducing the administrative burden and unintended impacts of the original proposal.
We’ve summarised the key updates and the practical steps you can take to prepare.
Key changes announced
Tax to apply only to realised earnings
The government has scrapped its plan to tax unrealised capital gains on super balances above $3m. The revised proposal will now apply only to future realised earnings, addressing major concerns about fairness and liquidity raised by tax professionals and fund managers.
Indexation of the $3m threshold
The $3m threshold will now be indexed in line with other superannuation limits. This change ensures that inflation and market growth do not gradually push more Australians into the higher tax bracket over time.
New $10m tier introduced
A second tax threshold of $10m will be introduced which will create a more progressive structure. Earnings between $3m and $10m will be taxed at 30%, while earnings above $10m will attract a 40% rate. Both thresholds will be indexed.
Implementation delayed until 1 July 2026
The introduction of the new tax has been delayed by one year, giving super funds, advisors, and affected members additional time to prepare. This adjustment also reduces the short-term impact on the federal budget.
Defined benefit pensions to be included
The revised design will ensure the new tax also applies to defined benefit pensions, maintaining consistency and fairness across different types of superannuation interests.
Boost for low-income earners
The Low Income Super Tax Offset (LISTO) will rise from $500 to $810, and the income eligibility threshold will increase from $37,000 to $45,000 from 1 July 2027. These changes will benefit an estimated 1.3m Australians, particularly women and part-time workers, helping them grow stronger retirement savings.
Budget impact of the reforms
Treasurer Chalmers confirmed the refinements will cost around $4.2bn over the forward estimates, mainly due to the one-year delay in implementation. He said the reforms “maintain the concessional treatment of superannuation, but ensure it is provided in a more equitable and sustainable way.”
How SW can help
Our superannuation and tax specialists can help you understand how these changes may affect your personal or business super strategy.
We can:
- review your super balance and investment mix to assess future tax exposure
- identify planning opportunities to manage contributions and withdrawals
- advise on the best way to structure your super for long-term efficiency and compliance.
These reforms will evolve as legislation progresses, so early planning is key. Contact your SW advisor to discuss how the new thresholds and timing changes could affect your retirement strategy.
